Cross-border circulation of films and cultural diversity in the EU

This paper explores new data sources on multilateral trade in films among EU countries and with the USA in offline cinema and in online video-on-demand distribution. We observe variations in trade patterns across countries and films and explore how they affect cultural diversity. We find that the EU film market is highly fragmented and cross-border film availability in cinema is low. We explore different aspects of the cultural discount hypothesis by means of a standard Helpman and Krugman (Market structure and foreign trade. Increasing returns, imperfect competition, and the international economy, MIT Press, Cambridge, 1985) trade model with economies of scale and a two-stage Heckman (Econometrica 47(1):153-161, 1979) estimation procedure. Our results show that cultural distance, success in the home market and the size of the film budget influence trade of films between countries. US films have a lower propensity to get into export markets, relative to their success in the home market. Consumer demand for imported films is relatively smaller in large EU economies, except for films imported from the USA that are only marginally affected. We also show that trade patterns in online film distribution are not fundamentally different. As online distribution occurs downstream from theatrical release, online distributors can benefit from cinema market experience to make a better selection of films. This results in a lower impact of domestic market shares on online trade patterns.